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Enable entrepreneurs to grow economy - expert

Cape Town - Failure to understand how entrepreneurs enable economic development, can easily lead to policies and decisions by government, civil society and labour that hurt entrepreneurs, or create conditions that prohibit optimal growth, cautions David Morobe, regional general manager of Business Partners.

At the same time, he emphasises that it is an oversimplification to regard small and medium enterprises (SMEs) as the cure for all unemployment problems. This oversimplification is likely to stem from the fact that people don’t generally understand why or how entrepreneurs contribute to economic development, in his view.

Economists do, however, agree on the important role played by entrepreneurs and SMEs in the economic development of SA.  

"Although entrepreneurial individuals can be found in large corporations and even government, it is in SMEs that they are able to give full expression to their innovative urges and energy," says Morobe.

Over 60% of all new jobs in SA are reportedly created by SMEs, and more than half of all formal salaries and wages in SA are paid by SMEs.

“These figures show that support for SMEs is one of the surest ways in which the main target of the government’s National Development Plan (NDP) – increased equality through inclusive economic growth – can be met by 2030,” he adds.

Four ways entrepreneurs contribute to NDP goals:

Creating new businesses

Entrepreneurs create new businesses. As South Africa moves toward a green economy, for example, it is usually the large investments (such as the opening of a big solar panel plant) that will make the headlines.

But the real driving force that spreads the solar panels throughout the country are the thousands of SMEs that sell them to households and businesses, often in rural and under-serviced areas of the country. This, in turn, stimulates other businesses.

“Communities and households hobbled by the lack of reliable and affordable electricity can use solar panels to power income generating activities. Subsequently there are opportunities for handymen, self-taught or formally trained, to service and maintain those millions of solar panels for years to come, and suppliers of electrical equipment also have a whole new market opening up for them,” says Morobe.

He points to the tourism industry, one of the priority industries identified by government, as another example of how SMEs drive economic development through business creation.

“Many small towns in SA, where large hotel groups won’t invest, have instead been turned into tourist meccas by pioneering small bed-and-breakfast businesses, small tour operators and events companies," he explains.

"The cascading effect is well documented, as the tourists whom they attract spend money on local crafts, food and services.”

Filling the gaps

SMEs fill the gaps.

“Every dollar that an SME entices from a tourist’s pocket, every solar panel that is sold, every transaction created by SMEs, all add to SA’s GDP," says Morobe. "The taxes generated by new SMEs also mean more resources flow into government’s redistributive and development projects, such as education.”

Social change

Through pioneering new and better ways of doing things, entrepreneurs influence social change in their communities.

“The radical effects that start-ups, such as Google and Uber have had on the world are well known. Locally, innovations driven by SMEs may be on a smaller scale, but they have a similar effect on the lives of South Africans,” he adds.

Entrepreneurial culture

Lastly, SMEs inspire entrepreneurial culture development, in his view.

“Through their example, SMEs show communities that it is possible to self-start, to solve problems, to create wealth through service, and to impart knowledge to the workers they train," he said.

"Incrementally, they are moving South African communities away from the idea of dependency on handouts and dead-end jobs, to one in which self-employment is a real and even the preferred alternative.

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